During their board meeting last week, the MPLT board of trustees reviewed their investment policy and the breakdown of their asset allocation in the market.
The board and the consultants delved into alternatives to their current asset allocation and sought to see the impacts of movements in the allocation to their distribution to the general fund.
MPLT board consultant Bruce MacMillan told the trustees that they need to analyze and think about how much they would like devoted to each area and potentially set a cap.
At 5 percent allocation, the domestic local investments area may need to be increased given new proposals on MPLT’s table: $10 million standby letter of credit to SSBCI program, $1.5 million CHC health record project, $5 million additional CHC loan, $200,000 Arctic Circle equity investment proposal, among others.
MacMillan said domestic local investments is higher risk and doesn’t translate into a richer yield than what they negotiated.
“We don’t have liquidity and diversification in that asset class so we are subject to much higher risk of not being able to achieve those yields on paper,” he added.
MPLT board Alvaro A. Santos suggested to set the cap at 18 percent for DLI.
“Based on the economic condition of the CNMI, I would recommend we should not commit no greater than 18 percent to DLI,” he said.
He said that once that 18 percent has been breached, MPLT should no longer entertain any other proposals for investment.
However the board reconfigures the asset allocation would impact their annual distribution of investment income to the general fund.
If the board were to raise the domestic local investments allocation, the money would be coming from core fixed income which currently has a strategic allocation of 55 percent of the total portfolio.
The MPLT board decided to defer making a decision for January when they meet for another board meeting.
Santos asked the other trustees “to review and be ready to discuss” next meeting.
As of Nov. 30, the MPLT had $69.7 million: $61.726 million in the general fund and $7.975 million in the American Memorial Park Fund.
Under the general fund, $5.9 million was in large cap core; $3.5 million, emerging markets; $6.069 million, convertible securities; $26.977 million, domestic fixed income; 4.02 million, high yield; $7.75 million, in local domestic investments and $7.35 million in international bonds.
Investment consultant Morgan Stanley Smith Barney vice president Daniel Roland reported that the MPLT earned $1.6 million as of Nov. 30.
